Dylan Grice Writes His Most Negative Note Ever: 'I Am More Worried Than I Have Ever Been'

SocGen strategist Dylan Grice is known for being pretty bearish in general, but this could take the cake.

Check out the way Dylan Grice begins his latest missive:

I am more worried than I have ever been about the clouds gathering today (which may be the most wonderful contrary indicator you could hope for...). I hope they pass without breaking, but I fear the defining feature of coming decades will be a Great Disorder of the sort which has defined past epochs and scarred whole generations.

What's this Great Disorder? Grice is talking about monetary easing by the world's central banks.

Grice is concerned that, as history has shown, currency debasement will lead to "social debasement," or a rise in social disorder as trust breaks down on a large scale.

And the social debasement is already easy to see in the United States, according to Grice. He writes, "The 99% blame the 1%, the 1% blame the 47%, the private sector blames the public sector, the public sector returns the sentiment ... the young blame the old, everyone blame the rich ... yet few question the ideas behind government or central banks ..."

Grice says we've been living through "what might be the largest credit inflation in financial history, a credit hyperinflation."

That "credit hyperinflation," however, has only served to enrich those at the top at the expense of those at the bottom.

Grice says even Keynes recognized this effect, which is why "it's ironic so many of today's crude Keynesians support QE so enthusiastically."

The Keynes quote Grice references:

“By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some."

Grice writes that the "credit hyperinflation" referred to above has been increasing inequality in the United States for years:

Median US household incomes have been stagnant for the best part of twenty years...yet inequality has surged. While a record number of Americans are on food stamps, the top 1% of income earners are taking a larger share of total income than since the peak of the 1920s credit inflation. Moreover, the growth in that share has coincided almost exactly with the more recent credit inflation.

These phenomena are inflation's hallmarks. In the Keynes quote above, he alludes to the artificial and iniquitous redistribution of wealth inflation imposes on society without being specific. What actually happens is that artificially created money redistributes wealth towards those closest to it, to the detriment of those furthest away.

And all this is contributing to the "social debasement" of America.

Grice looks at some examples from history where currency debasement led to a complete breakdown of the social fabric of communities like the Roman Empire, France during the revolutionary period at the end of the 18th century, and Weimar Germany.

In every case, citizens turned on each other as a sharply devalued currency led to a breakdown of trust between members of society.

A perhaps lesser-known incident that Grice brings to light, however, is a period in Britain during the late 16th and early 17th centuries when the country was rocked by witch trials:

Société Générale

Grice concludes with a warning: "All I see is more of the same — more money debasement, more unintended consequences and more social disorder. Since I worry that it will be Great Disorder, I remain very bullish on safe havens."